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Now you can buy a house! Well, not really. Kiwi houses are still very expensive. Charlie Gates looks at why and finds out it has nothing to do with avocados on toast.
In May 2017, property developer Tim Gurner was asked if young people faced the prospect of never owning a home.
His answer gave … View moreNow you can buy a house! Well, not really. Kiwi houses are still very expensive. Charlie Gates looks at why and finds out it has nothing to do with avocados on toast.
In May 2017, property developer Tim Gurner was asked if young people faced the prospect of never owning a home.
His answer gave the world a symbol for the housing crisis.
"Absolutely, when you're spending $40 a day on smashed avocado and coffee and not working. Of course. Absolutely," he said.
It was an offhand comment that crystalised a debate over housing affordability that has often split down generational lines.
Are young people struggling to buy homes because they are spending recklessly on luxury items like "smashed avocado"? Or are they struggling because generational shifts and sweeping economic changes playing out over many decades have slowly made houses less and less affordable?
Spoiler alert: it's the latter.
Despite a recent shift in house prices, Kiwi homes are still among the least affordable in the world.
But, how do we measure housing affordability?
One method economists use is to compare the median house price to the median household annual income. For example, in June 2018 the median annual household income was $88,904, but the average median house price was $560,000, according to interest.co.nz.
This means the median house price was 6.3 times bigger than the median annual income in June. The national figure has not changed dramatically, shifting to about 6.2 for August this year.
Economists generally agree that the median multiple, as it is known, should be around three for housing to be considered affordable.
But when was the last time the median multiple was that low in New Zealand?
Economists Selena Eaqub and Shamubeel Eaqub crunched New Zealand housing affordability figures going back to 1957 for their book Generation Rent.
The figures show that from 1957 to the late 80s, the median multiple remained under three, but in the late 1980s it started to rise and rise, before rocketing up at the turn of the millennium.
There are some regional variations in these figures. According to demographia.com, in the third quarter of 2017, Auckland had a median multiple of 8.8, while Wellington was at 5.5 and Christchurch was 5.4. Figures from interest.co.nz for August this year show Christchurch at 5, Wellington at 6.12 and Auckland at 9.2.
In 2011, Auckland had some of the most expensive housing in the world.
But why? To find out I asked economist Shamubeel Eaqub and housing expert Hugh Pavletich about the main problems keeping house prices so high. Here are the three main problems they raised.
1. Land supply
Eaqub said that "by far the biggest culprit behind higher house prices ... is the cost of land."
Since 1995 land costs have risen 73 per cent faster than incomes, he wrote in his book.
Land is expensive because there is not enough that can be used for housing. A lot of land is tied up in complex and restrictive planning rules.
Restrictions on land use constrict the supply of homes, Eaqub said.
Pavletich and Eaqub agreed that we should expand the city limits and build high density housing in the city centre.
2. Infrastructure funding
Land without infrastructure is just a paddock.
The roads, sewerage and powerlines needed for new homes are expensive.
Councils have under funded infrastructure for decades and are reluctant to borrow money to pay for it because that is politically unpopular.
Changes since the late 1980s, like privatising public assets, also mean councils are less able to fund infrastructure, Eaqub said.
"Councils were stripped of their assets," he said.
"Councils went from having lots of sources of income to just rates for infrastructure funding."
Pavletich said councils lost control of their costs.
"They could not keep up with growth and meet their infrastructure requirements."
"Costs have blown out and they haven't got the money to do it."
This means land that could be used for housing often remains a paddock.
Eaqub said that liberal economic reform in the late 1980s, known as Rogernomics, also changed the housing market because people could more easily borrow money.
"The pre-1980s banking system was very differently regulated and you couldn't get any money. That was gradually lessening from the 1960s onwards."
3. Political resistance
Attempts to change planning rules to free up more land and increase density have often met with political resistance.
In 2013, Auckland Council's unitary plan was watered down after resistance to higher density rules and expanded city limits.
People who already have houses are resistant to changes that would make houses cheaper.
"In the end, current vested interests have clearly taken a nimby approach in their voting," Eaqub said.
The consensus needs to change so a new generation can participate in the wealth and security of buying a home, he said.
So, the facts are clear, it is harder to buy a house now than at almost any other time in the last 60 years.
And it is also clear that young people's spending habits are not to blame.
"Millennials save more of their income than any other age group we have seen for generations," Eaqub said.
So are we going to do something about it, or just keep blaming young people for eating avocados on toast?
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… View moreShuttles Taxi and Tours Public
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The bus driver strike which was originally planned from Tuesday 23 October has been deferred until Thursday 25 October.
Bus services will no longer be affected on Tuesday 23 October, as previously advertised. We regret the impact and uncertainty the industrial action is having on our bus … View moreThe bus driver strike which was originally planned from Tuesday 23 October has been deferred until Thursday 25 October.
Bus services will no longer be affected on Tuesday 23 October, as previously advertised. We regret the impact and uncertainty the industrial action is having on our bus customers.
The strike action on Thursday could affect some services in Wellington city, Hutt Valley and Porirua. We will keep you updated on our website and social media.
For more information visit our website.
Why wait?
Enrolling in a single course at Victoria University of Wellington gives you the flexibility to pursue your passion, gain new skills or supplement your experience.
“Doing courses for a Certificate of Proficiency is a great opportunity for people to follow their own interests, … View moreWhy wait?
Enrolling in a single course at Victoria University of Wellington gives you the flexibility to pursue your passion, gain new skills or supplement your experience.
“Doing courses for a Certificate of Proficiency is a great opportunity for people to follow their own interests, and suits anyone who really wants to extend their learning and improve their skills and knowledge.”—Robyn Bargh, Certificate of Proficiency student
We mentioned a few days ago that kitten season has started. Yes it definitely has.
We have kittens at the Haven (4 King Charles Drive) now. They are currently going through their vaccination and desexing but will be available for adoption very very soon.
Come up this weekend and meet them. We … View moreWe mentioned a few days ago that kitten season has started. Yes it definitely has.
We have kittens at the Haven (4 King Charles Drive) now. They are currently going through their vaccination and desexing but will be available for adoption very very soon.
Come up this weekend and meet them. We are open for adoptions from 12pm to 3pm and on Labour Day 12pm to 2pm.
We look forward to seeing you and enjoy the long weekend!
This watch is in mint condition. No scratches has a charging dock but no cable can buy a cable from ware house for four dollars. I've barely used it. Offers only I will have it up on trade me as well
For most workers, part of your wage goes to ACC. We’re proposing you pay more because accidents and medical costs have gone up. If you’re a wage earner, these proposals could affect you.
Learn about all the proposals and have your say at our site by October 25.
We’re using a new high-tech building product to build more homes, faster, for those who need it most.
Cross-laminated timber (or CLT) allows state housing to be built more quickly and more safely, and creates attractive homes that are warmer, drier and safer for residents.
For the full … View moreWe’re using a new high-tech building product to build more homes, faster, for those who need it most.
Cross-laminated timber (or CLT) allows state housing to be built more quickly and more safely, and creates attractive homes that are warmer, drier and safer for residents.
For the full story, click here.
Hello neighbours, the team at Grove Avocado Oil are excited to announce that you can now purchase our range of extra virgin avocado oil flavours from our online store.
Visit our website to learn more about our products and see the delicious recipes that have been created for us by well-known … View moreHello neighbours, the team at Grove Avocado Oil are excited to announce that you can now purchase our range of extra virgin avocado oil flavours from our online store.
Visit our website to learn more about our products and see the delicious recipes that have been created for us by well-known New Zealand chef Michael Van de Elzen.
Pure avocado goodness, with at least 12 avocados in every bottle, Grove Avocado Oil is a natural source of vitamins and antioxidants. Discover why Grove is NZ’s number one avocado oil. Available online and in leading supermarkets.
The Grove Team
Wellington city, Hutt Valley and Porirua bus customers could face disruption to their travel from Tuesday 23 October due to a strike by members of the Tramways Union. The strike could go beyond Tuesday and we are monitoring the situation.
Please plan before you travel, or make alternative … View moreWellington city, Hutt Valley and Porirua bus customers could face disruption to their travel from Tuesday 23 October due to a strike by members of the Tramways Union. The strike could go beyond Tuesday and we are monitoring the situation.
Please plan before you travel, or make alternative transport plans. We will keep you updated on our website and social media.
For more information visit our website.
Road access to Wellington was temporarily down to a windy, hilly road that heavy vehicles can't use after two crashes blocked State Highways 1 and 2.
- Remutaka Hill road on SH2 was closed shortly before midday Friday after two trucks collided, adding further pressure to the road network at… View moreRoad access to Wellington was temporarily down to a windy, hilly road that heavy vehicles can't use after two crashes blocked State Highways 1 and 2.
- Remutaka Hill road on SH2 was closed shortly before midday Friday after two trucks collided, adding further pressure to the road network at the start of Labour Weekend. The road reopened about 1pm.
- An earlier truck crash about 3.45am near Pukerua Bay on SH1 has been blocking the road in both directions. The Mainfreight truck was carrying hazardous chemicals and paint products. The driver received minor injuries.
Motorists have been warned of major delays, and light vehicles can use the Paekākāriki Hill Rd. The section of road between Paekākāriki and Grays Rd at Mana is closed and Police said it could remain this way until late.
Keep up-to-date with the traffic chaos here.
NZTA regional transport systems manager Mark Owen said: "If people are heading out of town they need to think of an alternative at this stage, and it's certainly going to take a lot longer if they take an alternative route."
Police have asked motorists to avoid the area.
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Need a headboard to finish off your master bedroom but can’t find one to suit? Why not create your own one inspired by the sun or moon using your favourite colour. Make the most of your weekend with this easy step by step project idea from Resene. Find out how to … View moreNeed a headboard to finish off your master bedroom but can’t find one to suit? Why not create your own one inspired by the sun or moon using your favourite colour. Make the most of your weekend with this easy step by step project idea from Resene. Find out how to create this quick and easy project yourself.
Have you tried the UMF Manuka Honey Skincare, designed and handcrafted in New Zealand ? Certified 100% natural Skincare. Instore now.
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